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ACCA Strategic Professional · Strategic Business Leader · Public sector governance

A state-owned water utility has a board appointed by the government. A review finds ministers regularly direct the board to delay tariff increases, even where the regulator says costs require them. Which governance concern does this most directly raise?

The main concern is political interference that undermines the board's independence and the utility's objectives. When ministers direct tariff decisions against regulatory advice, the board cannot act on cost evidence, weakening accountability and the organisation's financial sustainability.

  1. APolitical interference undermining board independence and the utility's objectivesCorrect
  2. BExcessive managerial autonomy
  3. COver-reliance on private equity funding
  4. DLack of a marketing strategy

Explanation

Ministers overriding board decisions against regulator advice compromises board independence and clear objectives, a recognised risk in state-owned enterprises. The case shows too much government control, not excessive management autonomy.

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